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Weekly Privatization Report 4-17-2017

1) National: In the Public Interest releases Spending Blind, “a blockbuster report detailing how California’s charter school industry has wasted hundreds of millions of taxpayer dollars by opening and building schools in communities that don’t need them and often end up doing worse than nearby public schools, is a nationwide warning about how education privateers hijack public funds and harm K-12 public schools.”

The Washington Post’s Valerie Strauss
 writes that the report, written by Gordon Lafer, augments Carol Burris’ research on the lack of accountability and transparency in California charter schools by detailing another problem with these schools: that their funding “is almost completely disconnected from educational policy objectives, and the results are, in turn, scattershot and haphazard.” Apart from the disconnect to policy objectives, Bill Raden, writing in Capital & Main, says the ITPI report highlights the danger that charter management organizations pose by potentially privatizing public classroom space.

Legislation to defend traditional public schools from the depredations of private charter management organizations by putting their regulation back in the hands of local school districts has been introduced by State Senator Tony Mendoza (D-Buena Park/Gateway Cities). A hearing on the bill (SB 808) is set for this Wednesday.

2) NationalMuni Market Analytics says “Trump administration’s D.J. Gribbin’s advocacy for P3’s to ‘replace’ municipal bond industry and exemption reflects his tenure at HDR Inc.” HDR is an architectural, engineering, and consulting firm based in Omaha. Kidwell & Co., a muni advisory firm, chimes in: “The infrastructure P3 track record is sketchy at best. Munis offer the best opportunity to address infrastructure needs.” Municipal bond funds are back in favor with investors, says the Financial Times. “The shift back into funds that invest in the $3.7tn market—used by U.S. cities and states to fund public works—underlines the view that the Trump administration will not soon take the axe to the country’s tax code, preserving a key benefit to holding municipal debt.” [Sub required]

But as things stand, the Brookings Institution says an “infrastructure bill” is a “Washington fantasy.” Transportation secretary Elaine Chao has said legislation may be introduced next month. Whether it goes anywhere is anyone’s guess. A business-labor coalition is sponsoring an Infrastructure Week from May 15-17.

3) National: Private equity is hungry for profits from infrastructure privatization, and says it means the public will be “giving up some control.” Infrastructure Investor reports that Blackstone Group chief executive Steve Schwartzman says “there’s political consensus that U.S. infrastructure needs significant investment, and privatization is one way to accomplish this.” Schwartzman says “the prospect of government action on infrastructure is a ‘super big deal’ amounting to a multi-trillion-dollar investment opportunity. (…) He concluded the interview saying people must realize infrastructure privatization will be a tradeoff. ‘It’s going to involve some people giving up some control, but what you’ll get for that is lots and lots and lots of infrastructure.” [Sub required]

Also weighing in is BlackRock CEO Larry Fink, who says “private investments rather than municipal bonds must bear much of the financial burden for rebuilding the crumbling national infrastructure.” But Jeff Davis, a senior fellow at the Eno Center for Transportation, says “the ‘pay-for’ for any Trump infrastructure plan is likely to involve the tax code, whether it’s the $140 billion in special tax credit bonds in the $1 trillion plan the campaign outlined or some variant of repatriation of overseas corporate income. (…) No reform of the overseas corporate income tax can proceed until we know how repatriation is going to be handled. Any bonds as big as the one the Trump campaign was talking about would also make tax reform more difficult unless they are dealt with at the same time.” [Sub required]

4) National: Willem Sutherland, a managing director and head of infrastructure finance, Americas, at ING, warns against the widespread complacency about the supposed efficiency of private capital in ‘public private partnerships.’ “There still needs to be a determination that the private sector can build the project and run it at a lower all-in long-term cost than the state could, or at least deliver the project faster than a public procurement. Private investors may have more ‘skin in the game’ (equity risk), which is a strong incentive, but that doesn’t guarantee high quality, efficient infrastructure development that benefits the public. Sutherland says “governments should not assume that P3s will save the public money without proper structuring. After all, private investors are in it to make a profit. And although average cost overruns for P3 schemes are below that of ‘traditionally procured’ projects, to help mitigate against any unanticipated delays, events, cost overruns or unplanned risks, a clear contractual framework with the appropriate protocols needs to be put in place before a project begins.”

5) National/Iowa: An intrepid Iowa newspaper, the Storm Lake Timeswins a Pulitzer Prize for defending the public interest against agroindustrial water pollution. “The newspaper worked with the Iowa Freedom of Information Council to force the release of documents showing funding came from the Farm Bureau and other agricultural groups.”

6) National: In a new report, Community Initiatives for Visiting Immigrants in Confinement (CIVIC) documents that “the U.S. Department of Homeland Security’s internal watchdog fielded more than 1,000 complaints of sexual assault or sexual abuse from people in custody in a little more than two years.” The private, for-profit prison companies had the worst record: “The group also published figures, obtained from a records request by Human Rights Watch, that show private companies contracted by Immigration and Customs Enforcement had the most hotline complaints of sexual and physical assault from Oct. 1, 2012 to March 14, 2016, as opposed to centers managed by the agency. Detention centers managed by The Geo Group Inc. occupied first, third and fourth slots with facilities in Jena, Louisiana; Adelanto, California; and Tacoma, Washington. CCA Inc. facilities in Houston and San Diego occupied the second and fifth slots.” [CIVIC complaint]

7) National: Hundreds of immigrant detainees at the Northwest Detention Center have gone on hunger strike to protest poor food, poor access to medical care and near-slave wages at the facility, which is run for profit by the GEO GroupNWDC Resistance, the main support group, has called on people to “call the city of Tacoma’s finance department and urge them to revoke geo group’s business license,” and “call ICE and demand that they meet the Hunger Strikers’ Demands (see below) and that GEO Group not retaliate against hunger strikers. We have reports that strikers have been threatened with transfer to facilities away from their loved ones as punishment.” On Friday, Democracy Now! covered the hunger strike and detailed some of the issues facing detainees and their families. [Part 1Part 2]

8) National: As the firestorm over the United Airlines incident continues, Donald Cohen of In the Public Interest reminds us that “What United Airlines Really Wants Is to Privatize America’s Skies.” Cohen writes, “the major airlines see Trump as their best shot yet at privatizing our skies, and they might be right. Trump included air traffic control privatization in his March skinny budget and his administration is packed with privatizers. His top economic advisor, former Goldman Sachs investment banker Gary Cohn, told a room full of executives last Tuesday that privatizing air traffic control ‘is probably the single most exciting thing we can do.’”

Nor is the privatization mania a new thing. Last year four Chicago aldermen suggested that the city should privatize City aviation security at O’Hare. At the beginning of this year, another alderman suggested both outsourcing and arming them. And last year, when non-City low wage airport security officers tried to form a union, six of their eight leaders were fired. “Four more have been fired since then, including a man who was terminated three days after he joined a contingent of Service Employees International Union members for a June 24 meeting in Washington with U.S. Labor Secretary Tom Perez about airport working conditions.”

9) NationalHousing Secretary Ben Carson pushes ‘public private partnerships’ as the solution to the nation’s affordable housing crisis. Why? Because he thinks there’s “almost unlimited money in the private sector,” and “very limited money in the public sector.” Carson did not tell us what would fund the enormous revenue stream the private sector would demand to provide “almost unlimited” money for low income housing, or what the interest rate on that private financing might be compared to the federal government’s current borrowing costs. But he’s right on one thing, there is “limited money in the public sector”—since his boss just proposed shaving $6 billion off HUD’s budget.

10) National/District of Columbia: An inspector general’s report on unacceptable conditions at the Veterans Administration’s DC Medical Center should not be used to push for privatization, says AFGE president J. David Cox. Cox “called the situation ‘unconscionable,’ but said it should not be exploited to expand access to private care or strip career workers of their responsibilities. ‘Neither privatization, nor putting political hacks in charge of hospitals is the answer to the crises the IG has identified,’ Cox said. ‘Either of these responses will only worsen the situation at the VA.’” [AFGE press release]

11) National: Jessie Matias, writing in the Western Courier, says that New York State’s decision to provide free public college education is an opportunity for the whole country to rethink its approach to public education. “American culture says, ‘everyone for themselves,’ but considering how the wealth inequality keeps growing dramatically, maybe it’s time to leave that ideology behind and work toward a system that is more ‘all for one and one for all.’ Privatization, through outsourcing services, industry-sponsored departments, and the student debt crisis, has increased costs while at the same time reducing the quality of services. The rising costs are preventing working class students from attaining a higher education.”

12) GeorgiaA for-profit school chain, Camelot, has suffered a setback after the Muscogee County School Board in Columbus voted to delay a decision on hiring the company. “‘The abuse allegations were one of many red flags for me,’ said Muscogee school board member Frank Myers, one of five board members who supported postponement, while three were opposed. If the district is going to privatize such an important service, he said, ‘You ought to have an outfit that has a pristine record.’ The board bucked the wishes of school district officials, including Superintendent of Education David Lewis, who pushed to hire Camelot. ‘There was no transparency,’ Myers said. ‘They wanted us to rush this thing.’ Instead, a community advisory council will be created, and additional public hearings will be held. The council is expected to report back within three months.”

13) Kansas: The Garden City Telegram has criticized Trump for slashing USDA funding and warned about farm services privatization. “The plan would, in part, undermine water programs that ensure clean water for rural communities and strip away resources for already understaffed Farm Service Agency operations. FSAs, with a presence in most rural counties, play a critical role in helping producers navigate farm programs. Trump’s people suggest FSAs are in need of streamlining. While it’s always important to seek efficiencies, it’s also necessary to weigh the potential toll of significant cuts. The goal, no doubt, is to privatize FSA functions, which would do nothing to improve the quality of services.”

14) Maine: Patients are on “pins and needles” waiting for Gov. LePage to provide information on his stated plans to build a new state psychiatric facility and privatize its operations. “Democratic Rep. Charlotte Warren is sponsoring a bill to prohibit the privatization of state correctional facilities and the state’s forensic hospitals, while Democratic Rep. Drew Gattine is working on a bill to require the Department of Health and Human Services to improve the care of forensic patients at Riverview and Dorothea Dix.”

15) Massachusetts: The Massachusetts Bay Transportation Authority has approved a nearly $2 billion budget that could privatize four bus garages. “‘What you will be getting is bosses making a profit and workers making less money working on the buses, giving you poor-quality work, causing more failures and unsafe buses,’ said Paul Dion, a Local 264 machinist. “What we need from you is to be investing in upgrading the facilities we work in so we have the right equipment to do the jobs we were hired to do.’” The proposal “also drew criticism from officials of the International Association of Machinist and Aerospace Workers, who said quality would suffer under private companies. ‘The MBTA board should not hand over the keys to a private corporation who will end up driving the public transit system into a ditch,’ the labor group’s president Robert Martinez Jr. said.”

16) PennsylvaniaCity residents pack a town hall meeting to demand attention to Pittsburgh’s lead water problems. “[Glenn Grayson, Jr., of One Pennsylvania] and all the other panel members expressed strong opposition to any change that would privatize the city’s water authority operations or create a ‘public-private partnership,’ one of the options the city has considered. [Corporate Accountability International’s Alissa Weinman] said a decline in federal money support for public water operations has opened the door for private water companies to move in to many municipal and metropolitan areas. ‘But involving a private water company is never the solution,’ she said. ‘Public water providers are democratically controlled water systems that best protect the public.’”

17) Texas: Hundreds of members of the Texas State Employees Union marched to the Capitol to push for pay raises and oppose the privatization of foster care services. “The workers—chanting “Union-busting is disgusting” and “They say privatize, we say organize”—urged lawmakers to tap the state’s rainy day fund, which is projected to reach $11.9 billion in the next budget cycle, rather than make severe cuts to state agencies and public universities. ‘Stop pretending like Texas is broke and start spending on services that actually help Texans like higher education, Medicaid, state-supported living centers for the intellectually disabled, state hospitals for the mentally ill and protecting abused kids,’ said Judy Lugo, president of the 11,000-member union, which is affiliated with the Communication Workers of America.”

18) TexasConroe Mayor Toby Powell says his town doesn’t want a new federal immigration detention facility. “On Thursday, GEO was awarded a $110 million contract from ICE for the additional detention center, meaning Conroe could be home to more than 2,000 ICE detainees and federal prisoners combined by December 2018, when the construction could be completed. That was news to Powell and other city officials, who had no idea the new detention facility was even in the works. Powell only learned about the facility after reading about it in Friday’s edition of The Courier.”

19) VirginiaOfficials try to push through water rate increases before privatizing Petersburg’s water system. “Two private companies, Aqua Virginia and Virginia American Water, have put in bids to buy the system, which would give them full responsibility for water billing and system maintenance. Officials insist that water rates will need to go up regardless of whether the system is sold or not.” If the FY2018 budget passes, the rate would go up from $54.83 per 5,559 gallons to $71.06. “For the four corresponding fiscal years after FY2018, the rates will increase by 15 percent. So by FY2022, the rate for water and wastewater services will be $124.25.” Residents are not pleased: “Multiple citizens expressed concern over the proposed increases at the council meeting on Tuesday night. With 28 percent of Petersburg citizens living at or below the poverty line, many will be hit hard by these increases.”

Yesterday, Petersburg citizen Ron Flock lifted the curtain on the political shenanigans and corporate profiteering he sees as being behind the water privatization deal-making.

20) Washington: Anschutz Entertainment Group president Bob Newman makes his play for public money to finance his Seattle KeyArena renovation proposal. Of course it is “only a suggestion.” But “the public-bonding request has raised eyebrows, given the city’s Request for Proposals (RFP) on KeyArena renovations states that bids must involve 100 percent private financing of construction.”

21) International: An Australian pension fund says it’s suspending private equity investments after discovering scandalous labor practices in some of its portfolio companies. “Depending on the findings of the review, First Super may completely wind up its private equity portfolio, First Super CEO Bill Watson said. Consequently, the fund would increase investments in other asset classes such as unlisted infrastructure, unlisted property or more investment in listed companies. Watson said in a statement: ‘We are extremely concerned at exposure to investment risk through companies that have enterprise agreements in place which have lower wages and conditions than what is contained in the relevant modern award.’” [Sub required]

Legislative Issues

1) NationalDemocratic lawmakers are pressing the GAO to study tax credit vouchers for private schools. “The request comes as the Trump Administration, led by Secretary of Education Betsy DeVos, is championing a $20 billion federal school privatization program potentially modeled on state tax credit voucher programs. Recent reports have called into question the effectiveness of these state programs and highlighted fraud and abuse in their administration. ‘With the strong possibility of federal legislative activity on tax-credit vouchers at the federal level in the near future, we are interested in how states have designed these programs, whether they have strong internal controls, and whether they pose a risk of waste, fraud, abuse, misconduct, or mismanagement,’ the Senators write in their request. ‘A multi-state analysis of this issue by GAO would help inform the advisability of any future federal programs and help ensure proper fiscal accountability and transparency for federal funds.’”

2) Maine: A bill has been introduced “to provide additional deductions from a sentence of imprisonment for completion of education, mental health treatment and substance abuse treatment programs.” (LD 1415)

3) New Hampshire: As lawmakers debate SB 193, which would “allow parents to use 90 percent of the per-pupil grant the state gives to local public schools and instead put it toward alternative educational expenses, including private school tuition or homeschooling,” Lola Duffort takes on Jeb Bush’s pro-privatization mantra by looking at the experience of Chile with school privatization. “Urquiola said that in Chile’s case, public school performance—as measured by test scores—got ‘significantly’ worse with the implementation of vouchers. But Urquiola cautions that the main driver behind this was likely not that public schools did a worse job. Rather, the key factor was that higher-performing students transferred in large numbers from public to private schools.

‘(Chile) seems to be mainly a story of affluent students and affluent families leaving the public sector,’ he said.”

4) North Carolina: Last week two charter school amendment bills were introduced in the House on material revision of charters due to enrollment growth (H779), and to govern enrollment priority (H800). Other bills were also introduced, including on giving fair notice to students and families if charter schools are to be closed or restructured (H806); and on nondiscrimination by charter schools (H815), introduced by Rep. Cecil Brockman (D). The language on H815:

“(e) Except as otherwise provided by law or the mission of the school as set out in the charter, the school shall not limit admission to students on the basis of intellectual ability, measures of achievement or aptitude, athletic ability, or disability. A charter school shall not limit admission to students on the basis of race, creed, national origin, religion, ancestry, or sexual orientation. A charter school whose mission is single‑sex education may limit admission on the basis of gender identity. Within one year after the charter school begins operation, the charter school shall make efforts for the population of the school to reasonably reflect the racial and ethnic composition of the general population residing within the local school administrative unit in which the school is located or the racial and ethnic composition of the special population that the school seeks to serve residing within the local school administrative unit in which the school is located. The school shall be subject to any court‑ordered desegregation plan in effect for the local school administrative unit.”

5) Rhode Island: Legislation is introduced by three Democratic lawmakers to “have local district payments to charter public schools made only for those periods during which a student is enrolled and attending the charter school.” Now pending in the House Finance Committee. [H6131]

 

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